Germany’s car industry braces for a new government

Automotive Industry

Source: Politico, 2021-09-28

The German election result means tough talks on forming a new governing coalition, but that's good news for the country's car industry.

Before 26 September's vote, the automotive sector feared the outcome could lead to a left-leaning government formed by the centre-left Social Democrats, who narrowly won the election with 25.7% of the vote, joined with the Greens and The Left — a party with its roots in East Germany's old Communist Party. That sort of grouping would likely impose a 130-kilometre-per-hour speed limit on Germany's autobahns and be inclined to speed up ending the sale of combustion engine cars, a big demand of the Greens.

But The Left did poorly, garnering less than 5% of the vote. Now, coalition talks are centred on a three-party bloc involving the Greens, who took 14.8% of the vote, the liberal Free Democrats (FDP), with 11.5%, combining with either the SPD or the conservative CDU/CSU, which came second at 24.1%. 

The auto industry hopes that talks between the Greens and the FDP on striking a common position before approaching the larger parties will temper some of the Greens' car policies, aimed at reducing emissions from personal transport.

“Generally, the car industry is quite pleased that it’s not going to be red-red-green [left-wing coalition], because the FDP will put the brakes on the Greens plan for 130-kilometre-per-hour speed limit on the highways," said Matthias Schmidt, a Berlin-based auto Industry Analyst. 

But that doesn't mean that the industry won't face change under a new coalition.

If the Greens and FDP team up with the SPD — forming what's called the "traffic light" coalition — then the transport ministry will no longer belong to the Christian Social Union, the Bavarian sister-party of the Christian Democratic Union of Chancellor Angela Merkel. The CSU has run the ministry since 2009. 

Incumbent Transport Minister Andreas Scheuer hails from car-crazy Bavaria, and has made a point of protecting the auto industry. He resisted a ban on internal combustion engines and insisted on remaining open to all technologies, rather than just betting on e-mobility. Earlier this month, he told Bild that the combustion engine with synthetic fuels will be "the engine for innovation" in Germany.

The Greens are reportedly eyeing the ministry — which also covers aviation, shipping, cycling and digital infrastructure. Their big ask is to create a new climate super-ministry with veto power over any other ministry's decision to ensure all government policy is in line with the Paris climate agreement.  

Early coalition talks are already showing some signs of movement on the part of the liberals, previously firmly against a speed limit and ban on combustion engine cars.

FDP Leader Christian Lindner told Auto Motor and Sport magazine that the speed limit is a "symbolic debate," adding he was "surprised that a minor issue like the speed limit is supposed to be a coalition condition."

The Greens will "make a strong case" for the introduction of a speed limit if the party is part of a ruling coalition, Co-Leader Annalena Baerbock told ARD television a few weeks ago. The party's other Leader Robert Habeck even told the Pioneer last year that the speed limit is "probably the first action of a new government, if the Greens are in it."

That underscores the importance of speed limits to the party.

A much bigger issue than speed limits is the future of the combustion engine. The European Commission wants to end the sale of polluting cars by 2035, a date the Greens would like to move forward to 2030.

The FDP is against blanket bans on combustion engines. Lindner said that gasoline and diesel engines can still be a "technology option for the world," even if "the EU has unfortunately fixated one-sidedly on the battery-electric drive." 

What could make coalition-building easier is that the Commission's proposals allow German parties to kick that issue to Brussels, said Auto Analyst Schmidt.

Although German companies developed gasoline and diesel engines and spent more than a century perfecting those technologies, carmakers have largely reconciled themselves to the coming rise of battery-powered vehicles. Volkswagen plans to invest €73bn and sees going electric as a competitive advantage over slower rivals, as well as something that helps dim the shame of its Dieselgate scandal.

The shift in tone is apparent from the 10-point post-election wish list put forward by VW boss Herbert Dies, including purchase premiums for electric vehicles through to 2025 and "mandatory" targets for charging infrastructure.

"The fact that climate policy reforms, modernization and digitization are high on the agenda is a good basis for the coalition negotiations," said Diess.


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